When James Navarro arrived at his job as amedical equipment technician one morning in February 2011,something wasn't right. Due to a broken water pipe in the Arizonahospital where he worked, employees didn't have steam and hot waterto follow their normal protocol for sterilizing surgical equipment.Navarro's supervisor instructed him to use a differentsterilization machine and get hot water from the break room coffeemaker. Concerned about patient safety, Navarro refused to followhis supervisor's instructions and complained about the problems tohis co-workers.

The supervisor reported Navarro to human resources. Finding thatNavarro had been insubordinate, the hospital issued him anondisciplinary coaching. Shortly thereafter, Navarro received asubpar performance review.

Navarro filed a charge of unfair labor practices with theNational Labor Relations Board (NLRB), alleging that the coachingand poor performance review were retaliation for engaging in aprotected activity—complaining about job conditions. Anadministrative law judge (ALJ) determined that Banner HealthSystem, which owns the hospital where Navarro worked, did notviolate the labor laws. On appeal, the NLRB did something no oneexpected.

The board affirmed the ALJ's decision that there was no unlawfulretaliation against Navarro. However, it found that Banner violatedthe National Labor Relations Act by imposing a confidentialitypolicy while investigating Navarro's claims.

“We find that the Respondent's generalized concern withprotecting the integrity of its investigations is insufficient tooutweigh employees' Section 7 rights,” the board wrote.

In doing so, the board has created a host of unintended problemsfor employers, many of whom routinely request that employees keepinvestigations private.

“The labor board has an unrealistic sense of what companies aredoing and why they're doing it,” says Tom Gies, a partner atCrowell & Moring. “It's really outmoded and paternalistic.Confidential investigations are not a strategy to keep people fromunionizing. Most nonunion employers aren't even thinking aboutunions. There are too many other things to think about.”

Balancing Analysis

Banner had a policy that it required all employees to sign uponhire acknowledging that disciplinary investigations areconfidential and that employees could be disciplined or dischargedfor failing to maintain confidentiality. The NLRB decided that thispolicy was too broad and would have the effect of barring employeesfrom discussing workplace grievances with one another or unionrepresentatives in violation of the labor laws.

However, the board did not say that all confidentiality policieswere unlawful, per se. Rather, the board determined thatconfidentiality can be justified on a case-by-case basis. Forexample, the board stated that confidentiality could be justifiedto protect witnesses, prevent destruction or fabrication ofevidence, or stop a cover-up. But simply stating that these issuesare a concern in all investigations is not enough—Banner HealthSystem v. Navarro places the burden on the employer to conductthis analysis in each case and to provide sufficient rationale forconfidentiality.

“Nine times out of 10, when an employer requestsconfidentiality, it's because of these factors,” says KristinErenburg, an attorney at Walter Haverfield. “Now employers need todocument on a case-by-case basis how the facts and circumstances ofthe investigation required confidentiality in that particularcase.”

This requires employers to take proactive steps to avoidliability. One is retraining employees who conduct investigationsthat this analysis is required and must be documented. The other isreviewing the company's handbooks and policies and eliminatingblanket confidentiality rules that don't require an individualanalysis in each case.

Overlapping Concerns

The decision is of major concern to employers because a host ofdifferent laws, including Title VII of the Civil Rights Act of1964, the Sarbanes-Oxley Act, securities laws and the ForeignCorrupt Practices Act, require companies to conduct investigationswhen they receive a report of wrongdoing. For instance, whenconfronted with allegations of sexual harassment, Title VII imposesliability if the employer does not conduct a thorough investigationand take prompt remedial action.

Confidentiality has long been a routine request when doing suchinvestigations. For one thing, it's harder for an employer to getto the truth if employees have an opportunity to discuss the mattertogether before being interviewed. Likewise, discussions ofallegations of wrongdoing could lead to intimidation or harassmentof witnesses. Confidentiality is also important to protect theprivacy of the accuser and the alleged harasser.

“That could expose the employer to other liabilities,” says JohnBaker, counsel at White and Williams. “The disclosure of private orembarrassing information could lead to further lawsuits.”

Employers are also concerned that workers will be less likely toreport misconduct if they can't be certain that their reports willbe kept private.

“Without confidentiality, complainants or witnesses may bereluctant to come forward. Given the economy, people are veryconcerned about bringing trouble on themselves,” Erenburg says.

Broader Application

Although NLRB decisions are not binding precedent in courtsconsidering claims that don't concern a union, there areindications that there is momentum for applying the NLRB's logicoutside of the unionized workforce context.

Shortly after the NLRB decision in Banner HealthSystem, the Equal Employment Opportunity Commission's (EEOC)Buffalo District Office issued a predetermination letter adoptingthe same position—blanket confidentiality rules violate theanti-retaliation provision of Title VII.

“The most flagrant infringement of the rights that are conferredon an individual by Title VII's retaliation provisions is thedenial of the right to oppose discrimination. So, discussing one'scomplaints of sexual harassment with others is protectedopposition,” the letter states. “An employer who tries to stop anemployee from talking with others about alleged discrimination isviolating Title VII rights, and the violation is flagrant nottrivial.”

The letter is not binding authority, but it indicates thatemployers must be cautious about instructing employees to remainsilent about ongoing investigations regardless of whether theworkplace is unionized.

“Given the NLRB decision, it would not surprise me if the EEOCmade this part of its formal policy agenda,” Erenburg says.

Silence Isn't Golden

Since issuing its decision in Banner Health System v.Navarro, the National Labor Relations Board has on severalother occasions found that employer confidentiality policies wereoverbroad and violated the National Labor Relations Act (NLRA).

For example, in Flex Frac Logistics and KathyLopez, the board found on Sept. 11 that an employerprohibition on disclosure outside the company of “personnelinformation and documents” was unlawful because it could lead anemployee to believe that the company prohibited workers fromdiscussing wages and other terms and conditions of employment withunion representatives. Likewise, in Costco WholesaleCorporation and United Food and Commercial Workers Union,Local 371, the board found on Sept. 7 that Costco violated theNLRA by prohibiting employees from discussing other employees'“sick calls, leaves of absence, FMLA call-outs, ADA accommodations,workers' compensation injuries, and personal healthinformation.”